Customs, Excise and Gold Tribunal - Delhi
U.K. Paints Industries vs Collector Of Customs on 30 September, 1994
Equivalent citations: 1994(74)ELT392(TRI-DEL)
ORDER
Harish Chander, President
1. M/s U.K. Paints Industries, 19, DDA Commercial Complex, Kailash Colony Extension, New Delhi-110048 have filed an appeal being aggrieved from the order passed by the Collector of Customs, Bombay. Briefly, the facts of the case are that M/s. U.K. Paints Industries had imported 576 drums in six containers said to contain 109.44 metric tonnes Soyabean Oil Industrial Grade, valued at Rs. 21,57,404 CIF and the bill of entry vide No. 8810, dated 29th July, 19... was filed for the clearance of the said drums. Along with the bill of entry, the importers had submitted copies of Invoice No. OL 1909 dated 30th June, 1992 of suppliers M/s. Kuok Oils and Grains Pvt. Ltd., Singapore and also a certificate of origin issued by M/s. Pasir Gudang Edible Oils certifying that 576 drums (109.44 M.T.) Soyabean Oil Industrial Grade were manufactured in Malaysia by M/s. Pasir Gudang Edible Oils, SDN BHD, Malaysia. M/s. U.K. Paints Industries had also attached a declaration stating that invoice No. OL 1909 dated 30th June, 1992 of M/s. Kuok Oils and Grains Pvt. Ltd., Singapore, and also the other documents relating to the goods covered by the said invoice presented along with the bill of entry were true and correct in every respect. In their further declaration under Rule 10 of the Customs Valuation Rules, 1988, M/s. U.K. Paint Industries declared the description of the goods as Soyabean Oil Industrial Grade and the clearance of the goods was sought duty free under DEEC against Advance Licence No. P/W/1515846 dated 6th March, 1992 and P/W/3269123 dated 4th May, 1989 under DEEC Book No. 013963 dated 6th March, 1992. In respect of their claim for duty free clearance, they had also given a DEEC declaration stating that the goods were imported for the purpose of manufacturing goods for executing export orders and that they undertook to pay on demand any amount equal to the duty leviable in respect of the goods in case the conditions specified in the Notification No. 159/90 were not complied with. The invoice produced indicated that the goods imported were as per the confirmation on Note No. AIPL/92/C-550 dated 13th May, 1992 of M/s. Abhijat Impex Pvt. Ltd. The DEEC No. 6585 dated 4th May, 1989 permitted the import of various items including item Soyabean Oil/Tall Fatty Acid 859.20 metric tonnes valued at Rs. 77,03,435.00. The description, quantity and value of the respective licence was the same. However, the licence list was revised on 1st July, 1992 wherein the item Soyabean Oil/Tall Fatty Acid was again endorsed to be imported for the quantity 859.2 metric tonnes for the same value which otherwise permitted the import of Soyabean Oil Fatty Acid at the approximate unit price of around $ 540 CIF/PMT. Similarly, the DEEC Book No. 13963 dated 6th March, 1992 permitted the import of various items, inter alia, including Soyabean Oil Industrial non-edible grade for a quantity of 111.5 metric tonnes valued at US $ 56805.07. Accordingly, the unit price of the Soyabean Oil Industrial Grade as per the value and quantity shown on this licence worked out to around US $ 510 PMT/CIF. The goods under clearance were imported at the unit price of US $ 651.50 PMT/C and F Bombay as per the above-mentioned sales confirmation dated 13th May, 1992.
2. In respect of both the above-mentioned DEEC and import licences the importers were under export obligation to export synthetic enamel white and that as per the endorsement on the licences, the export obligation had been met before the import had taken place.
3. Pursuant to certain information, the officers of the Central Intelligence Unit had detained three consignments as under :-
(i) 15 containers awaiting clearance in Bombay declared to contain Linear Alkyl Benzene consigned to M/s. U.K. Paint Industries.
(ii) Six containers said to contain Sodium Tripoly Phosphate consigned to M/s. U.K. Paint Industries.
(iii) Six containers said to contain Soyabean Oil (Industrial Grade) consigned to M/s. U.K. Paint Industries and covered by the show cause notice issued on 26th May, 1993.
4. The goods covered by the six containers said to contain Soyabean Oil (Industrial Grade) were examined under CIU supervision and representative samples were drawn for test. The test report confirmed that the sample was in the form of light yellow oil and it was neutralised bleached and conformed to the specifications of Soyabean oil. The test report also confirmed that it was other than Raw Grade-2 which was intended for industrial use.
5. During the course of investigation, the CIU had obtained copies of the sales confirmation No. APL/92/C-550 dated 13th May, 1992 of M/s. Abhijat Impex Pvt. Ltd., Nariman Bhawan, 38-A, Nariman Point, Bombay-21. The said confirmation relating to the subject import consignment, inter alia, had given the specification of the Soyabean Oil as under :-
FFA - 0.1% max.
MNI - 0.1% max.
Peroxide - 2 MEQ Peroxide/Kg, max.
Colour - 3 Red max. 30 yellow
(5.25 inch levibond cell)
IV(WIJS) - 125 Min.
6. The Indian Standard Specification for Soyabean Oil IS 4276-1977 (reaffirmed in 1990), inter alia dealt with various grades of Soyabean Oil. As per the same, the materials obtained by the solvent extraction were of five grades i.e. (1) Refined Grade (2) Semi-refined grade (3) Degummed grade (4) Raw Grade-1 and (5) Raw Grade-2. According to the said Indian Standard Specification, refined grade of the oil was suitable for direct edible consumption while Raw Grade-1, Degummed and semi-refined grades were suitable for making Vanaspati and refined oil manufacture and Raw Grade-2 of the oil was intended for industrial use. Vide clause 4, in the said ISI specifications for Soyabean Oil various specifications for refined and Raw Grade-2, have been given separately.
7. Scrutiny of various documents seized and the statements of the concerned person indicated that the goods in question were liable for confirmation under Section 111(d), (m) and (o) of the Customs Act, 1962 and the importers liable to penal action under Section 112 of the Customs Act, 1962 for unauthorised import and attempted evasion of duty. Further, it also appeared that the goods in question were liable to be assessed to Customs duty at the appropriate rate after denying the benefit of Notification No. 159/90 (as amended) applicable to the imports under DEEC Scheme.
8. A show cause notice No. S/10-14/93 CIU was issued on 26th May, 1993 to M/s. U.K. Paint Industries, New Delhi, alleging inter alia, that
(i) the goods in question i.e. 576 drums (109.54 metric tonnes) Soyabean oil valued at Rs. 21,57,404.00 CIF were liable for confiscation under Sections 111(d), 111(m) and 111(o) of the Customs Act, 1962.
(ii) the importers M/s. U.K. Paint Industries were liable for penal action under Section 112 of Customs Act, 1962 for being concerned with the unauthorised import and attempted evasion of duty rendering the imported goods liable for confiscation; and
(iii) the goods in question were liable to be assessed to duty at the appropriate rate after denying the benefit of Notification No. 159/90 (as amended) applicable to the imports under DEEC Scheme.
9. The importers were also asked to explain as to why separate action in respect of similar goods admitted to have been cleared earlier under DEEC without payment of duty should not be initiated for recovery of duty and penal action in respect of those imports.
10. The appellants replied to the above show cause notice vide their letter dated 14th June, 1993. They, inter alia, stated that :-
(i) the allegations contained in para 3 of the show cause notice regarding 15 containers of LAB and 6 containers of S.T.P.P. are not correct as they do not belong to them.
(ii) They manufacture high quality paints and allied products and they are a recognised trading house. The bill of entry in respect of present consignment was filed in December, 1992, however, CIU had drawn fresh samples and sent for test.
(iii) Out of the two DEEC books and advance licence against which the clearance was claimed, one DEEC book covers Soyabean oil.
(iv) They have not denied nor tried to hide the facts that they have imported RBD Soyabean oil. The fact which emerges from the test reports is that the goods imported are refined, bleached and deodorised Soyabean oil. For edible consumption the grade should be RBHWD. The refined Soyabean oil is used in the varnish industry. As per earlier test report, the Soyabean oil imported by them was considered as raw material for Synthetic white enamel. However, the CIU did not accept the expert advice of their own laboratory.
(v) Apart from the test reports, there-is elaborate literature on the subject which would prove that refined grade of Soyabean oil is the only grade suitable for making alkyl resins which are used for manufacturing Synthetic white enamel. The ASTMD 1462-70 prescribes the specifications for refined Soyabean oil suitable for manufacturing paint and varnish. They had in the past imported similar grades i.e. R.B.D. Soyabean Oil and the custom house allowed the clearance of the same without any objection.
(vi) The documentary evidence mentioned in the show cause notice is nothing but ordinary correspondence they had with the indenting agent. The correspondence does not show any intention of mis-declaring the goods.
(vii) The Chemical Examiner's opinion is that the oil imported is not R.B.H.W.D. and as such it is not suitable for direct human consumption. The import policy for the year 1992-97 relating to the canalising items states that "oils including Soyabean oil are canalised but the policy does not draw any distinction between industrial and non-industrial grade of vegetable oils and therefore all vegetable oils are canalised. This was the policy for earlier period 1988-91, 1990-92. In the application for obtaining advance licences under DEEC they indicated use of refined soyabean oil as raw material. Therefore, the conclusion in the show cause notice that they were permitted to import Soyabean oil of industrial non-edible grade is not correct.
(viii) Notification No. 159/90-Cus., dated 30th March, 1990 exempts the goods imported against advance licences being raw materials required for manufacture of the export product. On the basis of standard books, they have shown that refined grade of Soyabean oil is used by them for making alkyd resin which in turn was used for making synthetic enamel white. They have sufficient evidence in their factory to show that what they have used for manufacturing Synthetic enamel white was refined Soyabean oil. Assuming that RBD Soyabean oil can be used for direct edible purposes, this fact alone does not disentitle them from availing of duty exemption under Notification No. 159/90. What they have imported is RBD Soyabean oil which is confirmed by S.G.S. certificate relating to the consignment.
(ix) There can be no term as industrial grade and refined grade. Various kinds of Soyabean oil find use in different types of paints. They wanted refined Soyabean oil for manufacturing purpose.
(x) The comparison of the price made in the show cause notice is not reasonable as the difference between RBD Soyabean oil and crude is only around US $ 25 PMT only.
(xi) In the earlier consignments imported by them sample was drawn and as per the test report, the goods were certified to be vegetable oil conforming to refined Soyabean Oil industrial grade which confirms the fact that what they had imported is refined Soyabean oil of industrial grade.
(xii) As per ISI specifications 11069/1984 RBD Soyabean oil has to be winterised and hydrogenerated before it can be used for direct edible consumption. Even though the ISI specification 4276-1977 has not been repealed, R.B.D. Soyabean oil is an essential raw material for them and the custom house laboratory clarified that only RBHWD Grade oil is suitable for direct edible consumption and the alternative use of a raw material cannot be a ground for denying the benefit of exemption notification.
(xiii) The custom house released identical imports in the past. Holding up the present import is not proper. There cannot be an allegation of contravention of Section 111(d) of the Customs Act, 1962.
(xiv) It is not correct to say that the imported goods do not correspond to the declaration made by them and hence they have contravened the Section 111 (m) of the Customs Act, 1962. As regards the allegation of contravention of Section 111(o) of the Customs Act, 1962, this will not stand as they have already exported the resultant product and their export obligation has already been met. Even if they have not observed the conditions in respect of the earlier consignments imported by them the impugned consignment cannot be held liable for action under Section 111(o) of the Customs Act, 1962. In view of the explanation given by them they are not liable to any penalty under Section 112 of the Customs Act, 1962. In support of their contention, they quoted various judgments and requested that the ratio of the said judgments should be taken into account as part of their defence.
11. After the hearing was concluded, the importers requested for sending representative sample to Central Revenue Laboratory, New Delhi for re-test. The Collector observed that the department's allegation is that the goods imported are refined, bleached and deodorised (RBD) Soyabean oil. Though the importers had declared the same as Soyabean oil Industrial non-edible grade, yet in their written reply to the show cause notice, and also during the personal hearing, the importers have clearly admitted that the goods imported are RBD Soyabean oil. Since there is no dispute that the goods imported are Soyabean oil RBD and the Deputy Chief Chemist of Custom House has also certified that the goods are RBD Soyabean oil, he did not find it necessary at this stage to order drawing of fresh samples for further test by the Chief Chemist and he had adjudicated the same. The adjudicating authority in his order had observed that the essential issue for disposal was whether Soyabean oil imported was of industrial non-edible grade or other than industrial grade. He was of the view that there was ample material to support the view that refined, bleached and deodorised (RBD) Soyabean oil cannot be treated as industrial non-edible grade. The primary support for this view came from the ISI specification for Soyabean oil IS: 4276-1977 which was reaffirmed in 1990. It classifies soyabean oil into 5 grades which include refined grade and raw grade. The ISI standard specifies that refined grade oil is suitable for direct edible consumption and raw grade 2 of the oil is for industrial uses other than Vanaspati and refined oil manufacture. Contention has been raised by the importers based on the specifications contained in IS: 11069-1984 indicates that there was a need for finding alternate use for indigenous soyabean oil as the soyabean oil (obviously refined edible grade as per the earlier specification) finds outlet in the manufacture of vanaspati only. The adjudicating authority further held that the matter would have been different if the latter specification for refined soyabean oil was meant for only "industrial use" other than "vanaspati". The specification of 1984 is, therefore, not for rescinding the earlier ISI specification for edible grades, but only for an extra-special grade other than that meant for Vanaspati and other edible uses. Therefore, neither the ISI specification IS : 11069-1984 nor the technical opinion given by the Dy. Chief Chemist of Custom House Laboratory supports the point of the importers that RBD soyabean oil imported by them is of industrial non-edible grade and edible grade is only RBHWD. The adjudicating authority has further observed that as already pointed out, the goods have been imported by misdeclaring the description. Clearance of these goods had been sought against two advance licences and two corresponding DEEC Books. In one of the advance licences bearing No. 15846 dated 6th March, 1992, the item permitted to be imported was Soyabean Oil Industrial Non-edible grade. This licence was not valid for import of Soyabean Oil of RBD Grade. The importers had attempted to import goods of CIF value of Rs. 17,13,563.00 against this licence. They had also attempted to clear the goods duty free to the extent of this value. As regards the other licence, the description given therein was Soyabean Oil/fatty acid. The importers had sought clearance of goods valued at Rs. 4,43,841.00 against this licence and the corresponding DEEC Book. Since the description of goods in this licence was generic and broad viz. Soyabean Oil without any classification it can be argued that it covers all grades of the said oil including RBD Soyabean oil. The adjudicating authority, therefore, gave the benefit of doubt to the importers following the ratio of Supreme Court judgment in the case of Jain Exports (P) Ltd. -1992 (61) E.L.T. 173 (SC) and Tribunal's judgment in the case of Oswal Woollen Mills Ltd. v. Collector of Customs, Bombay Order No. 1007-10/93-WRB, dated 3rd March, 1993. The adjudicating authority held that the clearance of these goods valued at Rs. 4,43,841.00 was permitted against licence No. P/W/3269123/C, dated 4th May, 1989. However, he further held that the appropriate customs duties shall be levied on this portion of the goods as they were not eligible for duty exemption under Notification No. 159/90-Cus., dated 30th March, 1990. The adjudicating authority further held that there was no dispute in regard to the Import Trade Control Policy relating to the import of Soyabean Oil. As per the relevant policy, the import of Soyabean Oil was canalised and its import was not permitted except by a canalising agency. Soyabean oil both edible and non-edible was canalised. Only Soyabean oil which was specifically mentioned in the advance licence and DEEC Book was permitted to be imported under the DEEC. He, therefore, held that the Soyabean oil imported i.e. Soyabean oil refined, bleached and deodorised valued at Rs. 17,13,563/- and sought to be cleared against advance licence No. 155846 dated 6th March, 1992 was not covered by the licence and the same had been imported in contravention of the provisions of the Customs Act, 1962 and was liable for confiscation under Section 111(d) and (m) of the Customs Act, 1962. As per Notification No. 159/90-Cus., dated 30th March, 1990 the exempt material should be those which are specified in the DEEC and advance licences and eligible for exemption for duty under the notification. Since the RBD Soyabean oil imported and sought to be cleared was not covered by the above-mentioned licence and DEEC, he held that the goods valued at Rs. 17,13,563/- CIF were not entitled for any duty free clearance under DEEC.
12. The adjudicating authority had further held that evidence on record indicated that the importers knowingly misdeclared the description of the goods so as to get them covered by the advance licence and the DEEC Books produced. The attempt to misdeclare the goods was to clear the same under the licence .knowing well that the said licence was valid specifically for the import of Soyabean oil Industrial Non-edible grade and not for Soyabean Oil RBD Grade. It was also observed that even after the case was taken up for investigation, the importers tried to get a certificate from the suppliers to show that the material shipped was not odourless. The idea behind obtaining such a certificate was to mislead the Custom House. He, therefore, held that by their acts and omissions the importers had not only rendered the goods liable for confiscation but also rendered themselves liable for penalty.
13. The adjudicating authority had further held that in the show cause notice it was alleged that Notification No. 159/90-Cus., dated 30th August, 1990 as amended exempts the material from customs duty on certain conditions and that since the goods were imported in contravention of the licensing provisions were not fully in conformity with the description, quantity, and technical specification as specified in the DEEC, there was apparent contravention of the condition of the notification. Therefore, it was alleged that the goods were liable to confiscation under Section 111(o) of Customs Act, 1962 without prejudice to the other allegations. During personal hearing, Shri Ashok Mehta argued that this provision will apply only if the goods had been released and the conditions were not fulfilled within the prescribed time limit. He also cited certain judgments in support of this argument. The goods in question were still under customs custody. There was no merit in this argument of the learned consultant. The adjudicating authority, therefore, held that the provisions of Section 111(o) of the Customs Act, 1962 were not attracted as the goods had not been released to the importer. Therefore, charge under Section 111(o) does not survive.
14. The adjudicating authority finally held that part of the consignment i.e. 22,515 metric tonnes of Soyabean oil valued at Rs. 4,43,841/- was allowed to be cleared against licence No. P/W/D/3269123/C dated 4th May, 1989 on payment of duty. The remaining part of the consignment i.e. 86.925 metric tonnes of Soyabean oil valued at Rs. 17,13,563.00 CIF sought to be cleared against licence No. P/W/D/1515846 dated 6th March, 1992 and DEEC Book No. 013963, dated 6th March, 1992 was confiscated under Section 111(d) and 111(m) of the Customs Act, 1962, read with Section 3(3) of Foreign Trade (Development and Regulation) Act, 1992. However, considering the circumstances of the case, he gave an option to the importers to redeem the consignment for home consumption on payment of a fine of Rs. 8.5 lakhs (Rupees eight lakhs and fifty thousand only) in lieu of confiscation, under Section 125 of Customs Act, 1962. This option would be exercised within one month from the date of receipt of the order. He had taken into account the margin of profit, continued storage and demurrage charges etc. incurred on the goods while determining the quantum of redemption fine. Appropriate customs duty would be paid on the goods besides the redemption fine. The adjudicating authority also imposed a penalty of Rs. 4,00,000/- (Rupees four lakhs only) on the importers M/s. U.K. Paint Industries under Section 112(a)(i) of the Customs Act, 1962.
15. Being aggrieved from the aforesaid order, the appellant has come in appeal before the Tribunal.
16. Shri Ashok Mehta, the learned advocate has appeared on behalf of the appellant. He reiterated the facts. Shri Ashok Mehta, the learned advocate pleaded that the appellants had imported Soyabean Oil Industrial Grade and the declared value was Rs. 21,57,404/- and the import was against DEEC licences and there are two DEEC licences which appear on pages 18 to 26 of the paper book. He also pleaded that the appellants have claimed the benefit of Notification No. 159/90-Cus., dated 30th March, 1990 which appears on page 274 of the paper book which provides nil duty for export orders basic as well as countervailing duty. He argued that the goods imported are covered by Duty Exemption Entitlement Certificate and the export obligation has been duly met by the appellants by earlier imports. Shri Ashok Mehta, the learned advocate pleaded that the benefit of this notification has been denied to the appellants by the adjudicating authority. He referred to the ISI Specification No. 4276-1977 which appears on page 284 of the paper book. He argued that the Collector has come to the conclusion that the refined Soyabean Oil is not the same as refined, bleached and deodorised Soyabean oil. He referred to the letter dated 10th June, 1993 of Shri O.P. Goel, Chairman of the Soyabean Processors' Association of India where it has been mentioned that paint companies like Asian Paints Ltd., Goodlas Nerolac Paints and Garware Paints buy soyabean refined oil (RBD) for use in the manufacture of paints and the following are the different types of oils traded in the market :-
(a) Soyabean crude oil
(b) Soyabean degummed oil
(c) Soyabean refined oil (RBD).
Shri Mehta argued that even refined Soyabean Oil can be used and RBD oil can be used for the manufacture of paint. Shri Mehta referred to the test report dated 3rd December, 1992 which appears on pages 37 to 39 of the paper book and in the test report it is mentioned that the sample is in the form of light yellow liquid having perceptible odour. It has got characteristics of refined Soyabean Oil. Please see note attached." Shri Mehta pleaded that in the note it is mentioned that "It is also seen from technical books that bleached, alkali refined Soyabean oil is used in paint and varnish industry. ASTM D 1462-70 prescribes specifications for refined Soyabean oil suitable for use in the paint and varnish industry. He referred to the standard specification for refined Soyabean Oil which appears on page 270 of the paper book and this specification is under the jurisdiction of ASTM Committee D-l on Paint and Related Coatings and Materials. He referred to maintenance of consumption and stocks maintained by the appellant which appears on page 194 of the paper book which clearly reflects the issue of oil for the manufacture of paint. He also referred to Report Slip which appears on page 198 of the paper book. He argued that for manufacture of paint it is not relevant whether the oil is edible or non-edible. Shri Mehta, the learned advocate argued that it is not the first import of the appellants. In the past such imports of the appellants were duly permitted. He referred to page 306 of the paper book and past clearances were duly given. He also referred to the Examination Report on the back of the bill of entry and the endorsement on the back of the bill of entry clearly shows that these were duly approved by the customs people. He pleaded that this bill of entry No. 1650-49 is dated 4th August, 1992. He argued that once the clearance was ordered, it was not open to get retested and referred to the retest report which appears on page 40 of the paper book and in the retest report dated 30th March, 1993 it has been mentioned that "the sample is in the form of light yellow having perceptible odour. It is bleached and conforms to specification of soyabean. It is other than Raw Grade 2 of the oil and, therefore, is intended for industrial use." Shri Mehta argued that no reliance should have been placed on the retest report. He has also filed written arguments and has pleaded for the allowing of the appeal.
17. Shri Sharad Bhansali, the learned SDR who has appeared on behalf of the respondent, relied on the order passed by the adjudicating authority. He referred to the first report which appears on page 37 of the paper book. He argued that Soyabean edible oil is canalised. He referred to the ISI Standard which appears on page 295 of the paper book. It relates to specification for refined, bleached, hydrogenated, winterized and deodorized (RBHWD) Soya-bean Oil. He argued that the first test report is erroneous and does not answer. the query. He referred to page 40 of the paper book and the queries are : "Whether Soyabean oil? Whether industrial grade?" Shri Bhansali, the learned SDR argued that end-use is not relevant. Shri Bhansali referred to internal page 16 of the Collector's order and referred to para No. 36 which appears on page 235 of the paper book where the Collector has observed that whether it is industrial non-edible grade or other than industrial grade, and the Collector has observed that there is ample material to support the view that refined, bleached and deodorised (RBD) soyabean oil cannot be treated as industrial non-edible grade. Shri Bhansali, the learned SDR argued that no reliance should be placed on the earlier test report. He referred to page 289 of the paper book which is ISI 4276 of 1977 and para 3.1.3 gives description of raw grade 2 of the oil is intended for industrial uses other than vanaspati and refined oil manufacture. He pleaded that the orders passed by the lower authorities may be confirmed and the appeal may be dismissed.
18. We have heard both the sides and have gone through the facts and circumstances of the case. We have also duly taken into account the written submissions filed by both the sides. We have perused the bill of entry No. 1650/49 which appears on page 16 of the paper book. The description in the bill of entry has been given as "Soyabean Oil (Industrial Grade)." We have also duly looked into the examination report which appears on the back of the bill of entry. The appellants have imported the same under DEEC Advance Licence Scheme and the advance licences appear on pages 18 to 26 of the paper book. The appellants had claimed the benefit of Notification No. 159/90-Cus., dated 30th March, 1990. The notification appears on page 247 of the paper book and DEEC appears on pages 21 to 25 of the paper book and pages 31 to 36 of the paper book. The adjudicating authority in para No. 36 of the order has made detailed discussion on the Soyabean Oil. Para No. 36 from the order passed by the Collector is reproduced below :-
"36. The essential issue for decision is whether soyabean oil imported is of industrial non-edible grade or other than industrial grade. There is ample material to support the view that refined, bleached and deodorised (RBD) soyabean oil cannot be treated as industrial non-edible grade. The primary support for this view comes from the ISI specification for soyabean oil. IS : 4276-1977 which was reaffirmed in 1990. It classifies soyabean oil into 5 grades which include refined grade and raw grade. The ISI standard specifies that refined grade oil is suitable for direct edible consumption and raw grade 2 of the oil is for industrial uses other than vanaspati and refined oil manufacture. In the case of Nageshwara Pozzolana Works Pvt. Ltd. v. Collector of Central Excise 1992 (58) E.L.T. 321, the CEGAT, Special Bench, New Delhi held that ISI specification has to be relied in the absence of any definition. Relying upon the Supreme Court judgment in the case of Collector of Central Excise v. Krishna Carbon Paper Co. 1988 (37) E.L.T. 480, the Tribunal held that :-
"It is also well settled that ISI specifications should be preferred unless there are strong reasons to the contrary ...."
Following the above judgments, I hold that the RBD soyabean oil cannot be treated as industrial non-edible variety of soyabean oil in view of ISI specifications. During the personal hearing learned consultant for the importers had argued that the test reports of the Custom House Laboratory indicated that it is only RBHWD grade which is suitable for direct human consumption as per the ISI 11069-1984 and since the goods imported by them are only RBD, the same cannot be considered as edible grade suitable for direct consumption. I have carefully looked into this aspect. The contention has been raised by the importers based on the specifications contained in IS : 11069-1984. On going through this, I find that this specification still confirms 5 grades specified by earlier specification IS: 4276-1977. Clause 02 of specification finds outlet in the manufacture of Vanaspati only. The matter would have been different if the latter specification for RBHWD was prescribed on the premises that the earlier specification for refined soyabean oil was meant for only "industrial use' other than "Vanaspati". The specification of 1984 is, therefore, not for rescinding the earlier ISI specification for edible grades, but only for an extra-special grade other than that meant for Vanaspati and other edible uses. Therefore, neither the ISI specification IS : 11069-1984 nor the technical opinion given by the Dy. Chief Chemist of Custom House Laboratory supports the point of the importers that RBD soyabean oil imported by them is of industrial non-edible grade and edible grade is only RBHWD."
The adjudicating authority has come to a finding that there is ample evidence to support the view that the refined, bleached and deodorised (RBD) soyabean oil cannot be treated as industrial non-edible grade. There are two test reports dated 3rd December, 1992 with the note sheet and another retest report dated 30th March, 1993. Both the test reports are reproduced below :-
"3-12-1992 : The sample is in the form of light yellow liquid, having no perceptible odour. It has got characteristics of refined soyabean oil. Please see note attached."
Note attached vide page 24A.
"30-3-1993 : The sample is in the form of light yellow having perceptible odour. It is neutralised, bleached and conforms to specification of soyabean. It is other than Raw Grade 2 of the oil and, therefore, is intended for industrial use." Note attached vide page 24B.
In the first test report reliance has been placed on ASTM 1462-70 which appears on page 270 of the paper book. Pages 270 and 271 viz. Standard Specification ASTM are reproduced below :-
Dy. C.C. 3-12-1992 NOTE As seen from IS 4276/1977 which relates to the specifications for Soyabean Oil, Refined grade of this oil (neutralised, bleached and deodorised) is suitable for direct edible consumption. However, it is seen from IS 11069/1984 which prescribes specifications for refined, bleached, hydrogenated, winterised and deodorised (RBHWD) Soyabean oil, that the flavour reversion in Soyabean Oil is a constraint in marketing the product as a direct consumption refined oil. This is overcome by the partial hydrogenation of the refined oil which improves the flavour stability. The sample tested is not found to be RBHWD grade.
It is also seen from technical books that bleached, alkali refined Soyabean oil is used in paint and varnish industry. ASTM D 1462-70 prescribes specifications for refined Soyabean oil suitable for use in the paint and varnish industry. It would be clear from the above that refined Soyabean oil is used in paint and varnish industry. Sd/-
(S.R. Subramanian) Chemical Examiner Gr. I For Deputy Chief Chemist.
CIO-INF/20/92 Dated: 12-2-1993 NOTE Soyabean Oil Batch No. 2 As seen from IS 4276/1977, which relates to the specification for Soyabean Refined grade of this oil (neutralised, bleached and deodorised) is suitable for direct edible consumption. However, it is seen from IS 11069/1984 which prescribes specification for refined, bleached, hydrogenated, winterised and deodorised (RBHWD) Soyabean oil, that the flavour reversion in soyabean oil is a constraint marketing the product as a direct consumption refined oil. This is overcome by the partial hydrogenation of the refined oil which improves the flavour stability. Thus it would be seen from the above that the marketable soyabean oil for direct edible consumption is RBHWD grade oil. The sample tested is not found to be RBHWD grade.
Sd/-
Chemical Examiner Grade I. Para 1 deals with specification which covers refined soyabean oil suitable for use in the paint and varnish industry and para 2 relates to applicable documents. A perusal of the title deed shows that the method of testing is very relevant. In the first test report there is no mention of the method adopted for the testing of the same. The Chemical Examiner in his first report should have mentioned the method which he had adopted in making the test.
19. Now coming to the second retest report which is dated 30th March, 1993, there is mention of ISI 4276-1977 and also there is mention of ISI1869-1992 which prescribes for specification for refined, bleached, hydrogenated winterised and deodorised (RBHWD) Soyabean oil. Neither the appellant nor the respondent has cross-examined the Chemical Examiner. ISI Standard 4276-1977 which appears on pages 85 to 88 of the paper book and para 3 relates to Grades. Para 3 from the same is reproduced below :-
"3. Grades 3.1 The material obtained by the process of solvent extraction shall be of following grades :-
(a) Refined grade,
(b) Semi-refined grade,
(c) Degummed grade,
(d) Raw grade 1, and
(e) Raw grade 2.
3.1.1 Refined grade of the oil is suitable for direct edible consumption.
3.1.2 Raw grade 1, degummed and semi-refined grades of the oil are suitable for making VANASPATI and refined oil only and not for direct edible consumption.
3.1.3 Raw grade 2 of the oil is intended for industrial uses other than VANASPATI and refined oil manufacture."
Para 4 relates to the Requirements and Table 1 of ISI Standard reflects the requirements for Soyabean Oil and the ISI Standard 11069-1984 relates to specification for refined, bleached, hydrogenated, winterized and deodorized (RBHWD) Soyabean Oil. Page 301 ISI 11069-1984 para 7 relates to the test methods. Paras 7 and 7.1 are reproduced below :-
"7. TEST METHODS 7.1 Tests shall be carried out in accordance with the methods prescribed in IS : 548 (Part)-1964, IS : 548 (Part 2)-1976, IS : 1448 (Part-21)-1970 and Appendix B as specified in col. 4 of Table 1."
A perusal of the same shows that even in ISI Standards test methods are prescribed. There are two chemical test reports before us. In the first test report dated 3rd December, 1992, it is mentioned that "the sample is in the form of light yellow liquid, having no perceptible odour. It has got characteristics of refined soyabean oil" and in the report dated 30th March, 1993, it has been mentioned that "the sample is in the form of light yellow having perceptible odour. It is neutralised, bleached and conforms to specification of soyabean. It is other than Raw Grade 2 of the oil and, therefore, is intended for industrial use." Second report is different from the first report. It raises a doubt as to the exact nature of the oil imported by the appellants and its fitness for use for edible or non-edible purposes. It is also admitted position that the goods are under the custody of the revenue authorities. For coming to the correct conclusion, we are of the view that fresh samples of the imported goods should be drawn and proper test from the Govt. laboratories or autonomous institutions should be done. With reference to the methods adopted by them for testing whether it is for edible or non-edible industrial purposes. It will be open to both the sides to adduce fresh evidence in accordance with law, if they so choose. Accordingly, we set aside the impugned order and remand the matter to the adjudicating authority having jurisdiction to readjudicate the matter after having fresh report and also after examining the Chemical Examiner, if necessary. Since we are remanding the matter to the adjudicating authority, we are not passing any order on the other merits of the matter. It will be open to the adjudicating authority to pass fresh order in accordance with law on other points too. In the result, the appeal is allowed by way of remand.